Meanwhile, the greenback continued to retreat following a reiteration of coming rate cuts this year from Fed Chair Jerome Powell as he continued his testimony to the Senate today.
Analysts at Commerzbank (ETR:CBKG) note that the BoC’s more hawkish tone relative to Powell’s comments indicate that the BoC is likely to move in lockstep with – or later than the Fed, implying further upside for the loonie in coming months.
Commerzbank analysts note, “Some market participants were expecting a more dovish tone in the statement. The fact that the BoC did not deliver reinforces our view that the BoC is unlikely to cut rates until after the Fed.”
“We therefore continue to see upside potential for the CAD in the coming months.”
Following the BoC’s rate decision yesterday, markets now expect rate cuts in July rather than in June, as had been priced in before the Canadian central bank’s interest rate announcement.
Jerome Powell’s testimony meanwhile has served to strengthen bets of a rate cut from the Fed in June.
Further impetus to the pair will come from tomorrow’s Canadian employment data, and U.S. Nonfarm Payrolls for February, which markets will be watching to gain further possible insights on the rate path forward for the Canadian and U.S. central banks.
On a technical level for the pair, analysts at FXStreet note that “Thursday’s decline drags the USD/CAD pair back into the 200-day Simple Moving Average (SMA) at 1.3477, and the immediate technical floor is priced in at the last meaningful swing low toward 1.3350.”
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